SFF joins the slaughter
Meat processor and exporter Silver Fern Farms Ltd has joined fellow South Island-based meat company Alliance Group in reporting a big loss for the past year.
However, the meat processor and exporter is telling its suppliers it remains on the right track - despite depressed market returns over the last couple of seasons.
Senior executives, as well as board members from the co-op which owns half the processing company alongside Shanghai Maling, are currently fronting farmers in a series of 18 Supplier Roadshow meetings throughout the country. These started in Rotorua and Hamilton on October 17 and will end in Middlemarch on November 24.
The message is that Silver Fern will stay the course as a supplier of quality meats - rather than fall back to the bad old days of meat-as-a-commodity - and the long-term trends are promising.
Chief supply chain officer Dan Boulton told the meeting at Lake Hood, Ashburton, that it had been "a bloody challenging" couple of years, with the company and farmers all facing "a huge amount of headwinds."
Coming after four or five years of relatively favourable pricing, Boulton says they are now seeing very depressed market returns, which is translating into poor farmgate returns.
Boulton believes it is "near" the bottom of the cycle - while acknowledging that the latest round of sheepmeat pricing took another step down - and it was a matter of working their way out of the cycle.
"We clearly recognise that farmgate pricing is unsustainable where it is and we've got to get out of where we are today."
He added that mid to long term demand for protein is really strong.
"Protein demand is going to double by 2050 and we're only wanting two percent of that globally."
Boulton says that SFF's "Plate to Pasture" strategy has not changed - despite some farmers thinking the slogan was the wrong way around, since the product goes from pasture to plate. He explained that value starts in the market by understanding what consumers want.
"Then how do we adapt and change our business and farming systems to make sure we remain relevant in that global context?"
Lamb Price Weak
On farmgate pricing, SFF sees more pressure on lamb than other meats.
Lamb is predicted to track between about $6.60 to $5.80 through January, for South Island suppliers.
However, questions from the floor showed some disquiet around returns; one farmer saying that fattening store lambs over winter was a major part of farming in the Mid-Canterbury district. He says current lamb pricing is making it very difficult and called for more certainty going forward.
Boulton says they can only signal what's going on in the market and the company was struggling to get customers to commit past January.
"We can only go out to January. We'd like to go further out and give particularly those finishers more certainty around what they can pay for those stores."
